Hilsenrath's 729 Word FOMC Post-Mortem (In Under 2 Minutes)

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It took Hilsenrath 2 minutes after the FOMC announcement to release the following 729 word analysis of what Bernanke just did. The punchline: "Overall, the Fed changed very little in its statement from the previous month. Neither a disappointing December jobs report nor recent turmoil in emerging markets was enough to diminish their positive outlook for the U.S. economy. The Fed reiterated their view that "risks to the outlook for the economy and the labor market as having become more balanced," language they added to the statement for the first time in December.... The Fed repeated its message that they will likely keep rates at
that low level "well past" the unemployment rate reaching 6.5%.
"

Fed to Further Cut Bond-Buying Program

 

The Federal Reserve said it would further pare its signature bond-buying program next month, a move that solidifies the central bank's strategy for winding down the program in small steps at each of its meetings as long as the economy continues to improve.

 

The Fed's policy-making committee said in a statement Wednesday that it would trim its bond purchases to $65 billion per month in February, from a monthly pace of $75 billion in January.

 

The decision to pull back on the bond program was unanimous, marking the first time there wasn't a dissent at a policy meeting since June 2011.

 

...

 

The central bank announced it would start scaling back the program following its Dec. 17-18 meeting, and made the first $10 billion cut in January. At the time, Fed Chairman Ben Bernanke strongly suggested the Fed's preference was to whittle down its bond buying by $10 billion at each of its policy meetings this year, wrapping up the program altogether near the end of the year.

 

...

 

Overall, the Fed changed very little in its statement from the previous month. Neither a disappointing December jobs report nor recent turmoil in emerging markets was enough to diminish their positive outlook for the U.S. economy. The Fed reiterated their view that "risks to the outlook for the economy and the labor market as having become more balanced," language they added to the statement for the first time in December.

 

 

All ten members of the Fed's policy-making committee supported the decision to continue scaling back the bond-buying program.

 

The Fed also voted to keep short-term interest rates pinned near zero, where they've been since late 2008. The Fed repeated its message that they will likely keep rates at that low level "well past" the unemployment rate reaching 6.5%. The Fed earlier set that as the threshold at which it will start considering raising rates, as long as inflation remains in check.

 

The Fed also extended an experimental program which it could someday use to manage short-term interest rates. Known as a "reverse repo" facility, the program uses the Fed's portfolio of bonds as collateral for loans to market participants and uses the rate on those loans to influence market rates. The experiment was set to expire Wednesday, but the Fed extended it for a year until Jan. 2015. They increased caps on the size of trades the Fed can make to $5 billion per counterparty from $3 billion.